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62–687 PDF 2010

EX–IM BANK OVERSIGHT: THE ROLE 

OF TRADE FINANCE IN DOUBLING 

EXPORTS OVER FIVE YEARS 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

AND THE

SUBCOMMITTEE ON 

INTERNATIONAL MONETARY POLICY 

AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 29, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–162 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

DENNIS MOORE, Kansas, Chairman 

STEPHEN F. LYNCH, Massachusetts 

RON KLEIN, Florida 

JACKIE SPEIER, California 

GWEN MOORE, Wisconsin 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

ALAN GRAYSON, Florida 

JUDY BIGGERT, Illinois 

PATRICK T. MCHENRY, North Carolina 

RON PAUL, Texas 

MICHELE BACHMANN, Minnesota 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

(IV) 

SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE

GREGORY W. MEEKS, New York, Chairman 

LUIS V. GUTIERREZ, Illinois 

MAXINE WATERS, California 

MELVIN L. WATT, North Carolina 

GWEN MOORE, Wisconsin 

ANDRE ́ CARSON, Indiana 

STEVE DRIEHAUS, Ohio 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

GARY G. MILLER, California 

EDWARD R. ROYCE, California 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

MICHELE BACHMANN, Minnesota 

ERIK PAULSEN, Minnesota 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

September 29, 2010 .......................................................................................... 1 

Appendix: 

September 29, 2010 .......................................................................................... 23 

WITNESSES 

WEDNESDAY, SEPTEMBER 29, 2010 

Gratacos, Osvaldo Luis, Acting Inspector General, Export-Import Bank of 

the United States ................................................................................................. 12 

Hardy, John, President, The Coalition for Employment Through Exports ........ 14 

Hochberg, Hon. Fred P., President and Chairman, Export-Import Bank of 

the United States ................................................................................................. 5 

Yager, Loren, Director, International Affairs and Trade, U.S. Government 

Accountability Office ............................................................................................ 13 

APPENDIX 

Prepared statements: 

Lee, Hon. Christopher J. .................................................................................. 24 

Manzullo, Hon. Donald A. ................................................................................ 25 

Paulsen, Hon. Erik ........................................................................................... 27 

Gratacos, Osvaldo Luis .................................................................................... 28 

Hardy, John ...................................................................................................... 41 

Hochberg, Hon. Fred P. .................................................................................... 46 

Yager, Loren ..................................................................................................... 60 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Moore, Hon. Dennis: 

Letter to Gene Dodaro, Acting Comptroller General, GAO, dated September 29, 2010 ............................................................................................. 71 

Biggert, Hon. Judy: 

Written statement of Donna K. Alexander, Chief Executive Officer, 

BAFT–IFSA ................................................................................................... 72 

(1) 

EX–IM BANK OVERSIGHT: THE ROLE OF 

TRADE FINANCE IN DOUBLING EXPORTS 

OVER FIVE YEARS 

Wednesday, September 29, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, AND

SUBCOMMITTEE ON INTERNATIONAL

MONETARY POLICY AND TRADE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittees met, pursuant to notice, at 4:10 p.m., in room 

2220 Rayburn House Office Building, Hon. Dennis Moore of Kansas 

[chairman of the Subcommittee on Oversight and Investigations] 

and Hon. Gregory Meeks [chairman of the Subcommittee on International Monetary Policy and Trade] presiding. 

Members present: Representatives Moore of Kansas, Meeks; 

Biggert, and Lee. 

Chairman MEEKS. [presiding] This hearing of the subcommittees 

is in order. We know the rules. We will have hear from both of the 

Chairs and, of course, both of the the ranking members, in that 

order. We will then introduce each of the witnesses that we have 

here. And I will now recognize myself for an opening statement. 

I want to begin by expressly thanking Representative Moore, 

who chairs the Oversight and Investigations Subcommittee, for cochairing this hearing with me today. And although he is not here, 

I also want to thank Representative Miller, and Representative 

Biggert, who is here, the ranking members of the subcommittees, 

co-chairing this hearing today for the bipartisan nature in which 

this hearing has been planned. 

The concern across both sides of the aisle is that we continue to 

do as much as possible to support quality job creation and retention here in America by supporting America’s exporting companies. 

I strongly support President Obama’s National Exports Initiative 

which aims to double exports in 5 years, supporting some 2 million 

high-quality jobs here in America. 

The global financial crises and related recession have greatly 

strained access to credit and trade finance for America’s exporters. 

While our economy struggles to restore and to create jobs, emerging markets are resuming the pace of pre-crisis growth. 

Just yesterday, the Asian Development Bank increased its economic growth forecast for Asia to 8.5 percent, excluding Japan. As 

Mr. Fred Hochberg, my good friend, puts forward in his written 

2 

testimony, 95 percent of global consumers live and work outside of 

the United States of America. What’s more, export-related jobs 

have a higher hourly wage than their peers focused on the domestic market. 

So as the American economy takes only hesitant steps on the 

road to recovery, the Nation’s exporters have been able to capture 

the foreign economic growth to do their part to kick start the American economy. 

Where the growth of the broader economy has been tempered in 

2010, exports have increased some 17 percent thus far this year. 

The role of the Export-Import Bank in meeting the President’s 

goals will be central. It is therefore tremendously encouraging to 

read that the Inspector General’s and the GAO’s testimony indicates that while there is always room for improvement, Ex-Im 

Bank has been making many of the necessary changes to improve 

the effectiveness of this institution. And I’m not surprised by it, because of its leader. 

I am very encouraged to hear about the targeted programs being 

implemented to promote U.S. experts to emerging markets. The 

global recession has led to double speed recovery with major emerging economies, including in Asia, Latin America, and Africa, seemingly resuming on the growth path they were on prior to the global 

recession. It is critical that American exporters get a foothold in 

these emerging economies that are likely to become major resources or major sources of global consumption and production in 

the coming decades. 

I was very happy to see the increased focus on small businesses 

here in America. We all know and agree that small businesses are 

the engine of innovation and job creation in the United States. 

Supporting their efforts to expand their consumer base internationally is the right thing to do, and we greatly benefit American jobs 

and economic recovery when we do so. 

Finally, I was happy to see the increased focus on exporting 

American services. American service exporters are likely to remain 

globally competitive despite market distortion behavior by certain 

foreign nations, mainly China. Indeed, service- and knowledgebased businesses represent a great opportunity to grow the global 

share of high-value American exports, to create high-paying American jobs, and to protect America’s share of the global export market. 

I would like to thank the witnesses for agreeing to testify today, 

and I look forward to an informative discussion as we consider the 

critical role of the Ex-Im Bank in supporting the goal of doubling 

American exports over the next 5 years and supporting the related 

jobs that will be created here in America. 

And with that, I recognize the ranking member, Mrs. Biggert for 

an opening statement. 

Mrs. BIGGERT. Thank you, Chairman Meeks and Chairman 

Moore, for holding this joint hearing which is important as we 

work to reauthorize and reform operations of the U.S. Export-Import Bank. 

The Bank’s authorization expires next year. As many of you may 

be aware, Chairman Meeks and I are co-chairs of the bipartisan 

Congressional Services Caucus, of which Chairman Moore is also a 

3 

member, and in that capacity we work to highlight the crucial contribution of services to our economy, to employment, to trade and 

investment, and to U.S. competitiveness in the global economy. 

This year, our caucus has held briefings on the importance of finalizing the U.S.-Korea, Colombia, and Panama free trade agreements, and the time is now for the Administration to finalize these 

agreements and submit them to Congress for a vote. These FTAs 

are critical to increasing the U.S. services exports, helping our 

economy grow and creating jobs here at home. 

Towards that same goal, I wanted to thank Chairman Hochberg 

for his commitment to increase Ex-Im’s efforts to support the services sector, particularly in the financial services sector as he correctly noted in his written statement: ‘‘Services account for a trade 

surplus in a real competitive advantage for U.S. companies.’’ During their previous Ex-Im reauthorization, this committee recognized Ex-Im’s important mission to create and maintain U.S. jobs 

by providing financial support for U.S. exports. 

That’s exactly what this Congress and the Administration should 

focus on, creating jobs. And that starts with facilitating the growth 

of small businesses, which generate approximately two-thirds of 

new jobs. That includes providing businesses with tax relief, regulatory certainty, and helping small businesses increase exports. 

And that’s why at a time when unemployment continues to hover 

around 10 percent, we must continue to bolster effective, self-sustaining Federal programs like Ex-Im that can work to jump-start 

the economy without vast expenditures of taxpayer dollars. 

I want to note that I appreciate that Ex-Im has partnered with 

the SBA and the Department of Commerce to reach out to small 

businesses. In particular, Ex-Im has increased its outreach in the 

Chicago area. In my district, I recently held two supermarkets for 

small businesses, which included Ex-Im, Commerce, and SBA officials. 

The resources and guidance operated by these agencies was extremely well-received by small business operators eager to find new 

economic opportunities. And I encourage my colleagues on the committee to hold a similar event in their own districts. 

In addition, I hope that we can work together to find new ways 

for Ex-Im to expand its small business resources beyond outreach. 

The bottom line is coupled with the FTAs. Ex-Im is one of the best 

tools we have to increase exports, beat the competition abroad, 

strengthen our economy, and create jobs. 

Let’s face it. In our increasingly competitive global environment, 

we as policymakers have to ensure that we provide every advantage and remove every disadvantage for American companies to 

compete successfully abroad. That means all of our government 

policies must work in a coordinated manner from tax to foreign assistance, trade, regulatory, and export financing. 

With that, I would like to thank today’s witness for sharing with 

us expertise and suggestions. And I ask unanimous consent that 

testimony be included in today’s hearing record from a familyowned and operated small business, Apac Engineering products, 

created in Aurora, Illinois, in my district, and also testimony from 

BAFT–IFSA, the Bankers Association for Finance and Trade and 

International Financial Services Association. 

4 

With that, I yield back. 

Chairman MEEKS. Thank you. And I now yield to the Chairman 

of the Oversight Subcommittee, Chairman Moore of Kansas. 

Chairman MOORE OF KANSAS. Thank you, Mr. Chairman. 

Our economy continues to slowly recover following the worst financial crisis we have seen in generations in this country. It’s well 

known that lax oversight and poor regulation of our financial system for too many years sowed the seeds of a near collapse of our 

entire economy, the worst of its kind since the Great Depression. 

And who paid the price for these mistakes? Unfortunately, it has 

been our constituents and small businesses on Main Street. 

So I was pleased when this Congress responded with the DoddFrank Wall Street Reform and Consumer Protection Act. The new 

law provides tough but fair financial rules that will end ‘‘too-bigto-fail’’ and better protect consumers and investors while shielding 

responsible small businesses and community banks from excessive 

regulation. 

We know that the success of our small businesses is crucial for 

a strong economic recovery. Knowing this, the Congress also passed 

and the President signed into law this week the Small Business 

Jobs Act of 2010. The new law extends successful SBA recovery 

loans while offering billions more in tax breaks and lending support for entrepreneurs and small business owners. But the work 

does not end there. Growth and exports can also help our economy 

if we have the full participation of small and large businesses, exporting U.S.-made goods, and competing in the global marketplace. 

So I was pleased when President Obama laid out an ambitious 

but achievable goal in his State of the Union address earlier this 

year that we double U.S. exports over 5 years. Today, our Oversight Subcommittee, along with the Subcommittee on International 

Monetary Policy and Trade chaired by Chairman Meeks will look 

at the issue of finance with respect to this National Export Initiative, in particular, taking a close look at the Export-Import Bank 

of the United States and what role it plays in providing export finance to our businesses competing globally. 

I am glad we’ll hear from the Chairman and the acting Inspecting General of the Ex-Im Bank, as well as GAO and a coalition of 

business exporters to assess how well the Ex-Im Bank is achieving 

its mission, and what areas of improvement or recommendations to 

Congress they may have. 

Thank you, Mr. Chairman, I yield back. 

Chairman MOORE OF KANSAS. I yield to the gentleman from New 

York, Mr. Chris Lee. 

Mr. LEE. Thank you, sir. I’ll be brief. And, unfortunately, due to 

the lateness of this, I’m not going to be able to stay for all of my 

questioning, but I would like to be able to submit for the record 

some questions and be able to follow up. 

To be honest, there’s not a lot of government agencies that I usually am enamored with, but I think what you do is critical for this 

country, and I’m a very large advocate because my background is 

manufacturing and getting this country to realize that if we don’t 

start producing more tangible goods in this country, we are in a 

world of hurt, and we need to realize that we’re only 5 percent of 

the world’s population; 95 percent of the consumers live outside of 

5 

this country and we should be having a long-term manufacturing 

strategy that addresses it, and your integral part is ensuring that 

there is capital available. Many of my questions surround whether 

or not you have access to the right amount of staffing support so 

that we can continue to grow that. 

So, again, I apologize for having to leave, but I look forward to 

following up with you, so good luck today. 

Chairman MEEKS. Thank you. It’s now my distinct pleasure to 

present our first witness. 

Fred P. Hochberg is the Chairman and the 23rd President of the 

Export-Import Bank of the United States. He was nominated by 

President Obama in April 2009, and as indicated in my opening 

statement we know that Ex-Im Bank will play a key role in the implementation of the President’s National Export Initiative. It 

should double U.S. exports in 5 years, and I agree with the ranking 

member in that we do need to get some of these trade agreements 

passed. 

I’m with you on that, which will help us do that and help us open 

some of these markets. But under the leadership of Mr. Hochberg, 

the Bank has broadened its credit offerings and dramatically improved the loan response time to help small and medium-sized exporters create local jobs through increased global sales. He has 

more than 30 years experience in business, and when you’re talking about having the right man in the right place at the right time, 

30 years of experience in business and government and philanthropy. 

From 2004 to 2008, he was the Dean of the Milano School, the 

new school for management and urban policy in New York. From 

1998 to 2001, he served as Deputy, then acting Administrator of 

the Small Business Administration, and that was during the Clinton Administration. And what is most impressive, he was president 

and CEO of the Lillian Vernon Corporation, where he led the 

transformation of a small, family-owned mail-order company into 

an $180 million direct marketing corporation traded on the American Stock Exchange. 

So he understands business. He understands small business in 

particular. I am also proud to say that he is a native New Yorker, 

and from the New York Metropolitan area where he received his 

undergraduate degree from New York University and his MBA 

from Columbia University. 

Mr. Chairman, it’s a pleasure to have you and welcome. 

STATEMENT OF THE HONORABLE FRED P. HOCHBERG, PRESIDENT AND CHAIRMAN, THE EXPORT-IMPORT BANK OF THE 

UNITED STATES 

Mr. HOCHBERG. Thank you, Chairman Meeks, Chairman Moore, 

Ranking Members Miller and Biggert, and members of the subcommittees. 

Thank you for inviting me to testify before this joint hearing on 

what the Export-Import Bank of the United States is doing to create jobs here in America. Since its establishment in 1934, Ex-Im 

has had but one central objective: to create and sustain American 

jobs to exports. The Bank was founded with this goal during the 

6 

depths of the Great Depression and remains true to its mission 

today. 

Let me tell you, ‘‘Made in America’’ still resonates around the 

world. When the books close tomorrow, on Fiscal Year 2010, it will 

be another record-setting year with total authorizations in the 

range of $25 billion, supporting approximately 230,000 American 

jobs. 

The important work is done at no cost to the American taxpayer. 

Let me repeat. This work is done at no cost, whatsoever, to the taxpayer. In fact, since 1992 Ex-Im has earned and returned more 

than $4.5 billion to the U.S. Treasury. The Bank is self-sustaining, 

meaning it funds its programs and administrative budgets from 

fees paid by buyers and borrowers. We don’t make grants and we 

don’t increase the deficit. 

Of the approximately 3,400 transactions the Bank supported in 

2010, about 85 percent of these authorizations support small American businesses, and that includes more than 600 new small business clients this year alone. Also, Ex-Im supportive environmentally beneficial exports have increased dramatically from $2.6 

million in 2006 to an estimated $330 million for this fiscal year, 

more than an 125-fold increase over that 4-year timespan. 

As a former business owner, I understand firsthand the challenges many of these companies face tapping into new markets. As 

Chairman of the Export-Import Bank of the United States, I have 

made small business a top priority. Chairman Moore, you may be 

familiar with one of the companies Ex-Im has assisted this year: 

Knit Right in Kansas City. Knit Right manufactures medical textile products. They have 160 employees, and their top markets include Mexico, Germany, and Sweden. Additionally, Ex-Im supported almost $300,000 of export sales 

from Apex Engineering of Aurora Illinois, which employees 11 people in Representative Biggert’s district. In overall support last year, 

the Ex-Im Bank supported about $1.4 billion in exports from the 

districts represented by the members of this subcommittee. That’s 

$1.4 billion from this subcommittee alone. 

As an official credit agency in the United States, Ex-Im plays a 

critical role in President Obama’s National Export Initiative that 

seeks to double exports to $3.1 trillion by 2015. Working with Congress and the Administration, Ex-Im Bank is helping to lead that 

effort. 

Exports of U.S. goods and services increased 17.9 percent during 

the first 7 months of 2010. The United States remains on track to 

meet President Obama’s goal of doubling exports in 5 years. Ex-Im 

provides American small businesses with the tools they need to 

compete for the 95 percent of the world’s consumers who live outside the borders of the United States. This past May, Ex-Im expanded access to the Bank’s short-term programs. 

Let me give you an example of how it works. There’s a small 

company in Miami named Demetech that exports surgical supplies 

to more than 80 countries. In the past, the Bank could only cover 

the cost to export those products that were incurred on the factory 

floor. That is the net rules in effect since 1968. 

We have now changed that and expanded the eligibility so we 

can cover costs such as design, packaging, bookkeeping, and quality 

7 

control. This means that a small company like Demetech has additional access to credit insurance to allow them to ship to more 

places, and the result is more sales and more jobs. This year, the 

company’s sales are up almost 100 percent, and about 30 percent 

of this increase is due to the support provided by Ex-Im. 

As Demetech’s CEO has told me, about 40 of the company’s 100 

employees are working because of this increased demand. And 

then, just 2 weeks ago, Ex-Im launched a program to help what are 

called indirect exporters. These are companies, many of which are 

small, that supply components to products that are then exported. 

This program injects liquidity into the marketplace and affords 

small businesses with ready access to capital and an increased 

competitive edge. 

So whether a company is exporting surgical sutures or services, 

and regardless of whether the final destination is Brazil or Bulgaria, Ex-Im is determined to help more U.S. companies export to 

more countries to find more customers, and that means more jobs 

here in America. 

Thank you for the opportunity to testify, and I would be pleased 

to answer any questions you might have. 

[The prepared statement of Mr. Hochberg can be found on page 

46 of the appendix.] 

Chairman MEEKS. Thank you, Mr. Hochberg. 

Let me just start out with, I see that there has been growth in 

the first year, and my question is, do you see any barriers? What 

happens is sometimes we have great expectations and then something hits us that’s unforeseen that stops growth. Do you see any 

barriers in the immediate future that can prevent Ex-Im and the 

export market from continuing to grow at its current rate or even 

a greater rate as we move forward? 

Mr. HOCHBERG. Thank you for that question. I see tremendous 

demand overseas for American products; and, as I mentioned in my 

testimony, ‘‘Made in America’’ really has resonance and meaning 

for quality and service. My concern is that the Bank is almost— 

2 to 3 years ago, the Bank did about $12 billion to $14 billion a 

year. We’re going to be in the range of $25 billion this year. 

My concern is having the resources. The Bank was built at the 

$14 billion to $15 billion authorization level. We are now authorizing a full $10 billion on top of that, and I see greater growth. So 

I see the concerns about how we are continuing to meet that market and meet it timely with the resources that we have. 

Chairman MEEKS. And one of the things that—in my district in 

New York, we try to meet regularly with some of our small businesses, trying to show them where they should be expanding so 

that they can export, so there’s a greater market, etc. Is there anything that the Ex-Im Bank is doing to lay a great foundation? Or, 

outwardly—you talked earlier about how the number of our businesses are doing exports. 

Is there anything that you have to lay foundations for small businesses and districts like ours and others that we can tap into? Can 

you talk to me? 

Mr. HOCHBERG. Yes. In October a year ago, this month a year 

ago, we launched a program called Exports Live, that would bring 

in some small business owners. Some of our sister agencies, the 

8 

Small Business Administration, Commerce, USCR, and others run 

a half-day seminar or workshop with small business owners. 

To date, we have conducted 16 of these. Since last year, more 

than one a month. We have been doing them most recently working 

with Members of Congress and would be happy to meet with any 

member of this committee or other Members of Congress, and host 

one in their district. We did one recently with Senator Warner in 

Richmond, Congressman Costello in the St. Louis area, and Congressman Maffei in the Syracuse area, so these have been a successful way of getting the word out. 

My concern again obviously is if we never were appropriated that 

money, we have sort of scraped together and done those. But they 

were an important way of making sure particularly small business 

owners understand the vast resources that are at their disposal. 

Chairman MEEKS. Let me ask you one more question, and then 

I’m going to turn it over to Mrs. Biggert. 

I am also very interested, and I think that Ex-Im seems to give 

American exporters better financial tools to penetrate emerging 

markets. How do you see the increased focus on emerging markets 

impacting the composition of the global export market, because I 

do a lot of work in some of these emerging markets, and so I would 

like to get your viewpoint on that. 

Mr. HOCHBERG. Chairman Meeks, both of us have been to Colombia a number of times. Colombia is one of our target countries for 

opportunity. We in the United States are growing at a rate of 2 or 

3 percent. We are growing at a somewhat slower rate than some 

of these emerging economies. Economies in Brazil, India, Vietnam, 

Indonesia, and Colombia are growing at rapid rates. There are 

great opportunities there for American exporters. 

What we need to make sure is that we have the resources to support them, so when they are able to secure a sale, we can get an 

answer, get them to yes quickly so that we can provide the financial resources. But, clearly, the world has relied on the American 

consumer for many years. We’re now going to be looking to rely on 

many developing countries to sort of power the global economy. 

Chairman MEEKS. Are we working in sync, do you think? We are 

looking at American companies, those of us in the legislative bodies 

and the agencies. Do you think we’re in sync to make sure that we 

can be successful in getting our businesses into these emerging 

markets? 

Mr. HOCHBERG. I think we’re in sync. I think one of the things 

I see, it is a brutally, brutally competitive market out there, and 

American companies have to fight for every single sale they get 

and fight with other competitors. My only concern, as I mentioned, 

I don’t want to repeat it too often. I want to make sure I have the 

resources to meet in those small communities. 

It takes longer to do a small business transaction. It’s much more 

one-on-one, meeting company CEOs in their offices and sort of explaining and giving them the information so they can get over the 

concern about risk they might have selling overseas. 

Chairman MEEKS. Thank you. Mrs. Biggert? 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Chairman Hochberg, Ex-Im has been criticized for not fully engaging key stakeholders and partners before implementing new 

9 

procedures or policies, and this is not the same question that you 

just addressed, but it seems a collaborative process should be the 

norm rather than the exception. That helps to avoid confusion and 

errors. What is Ex-Im doing to help enhance export and lender participation and put input into the Bank programs and improve their 

capacity to increase market growth for U.S. exports? 

Mr. HOCHBERG. I think that we can do a better job of that. In 

these 16 Export Live events around the country, easily a dozen of 

those I usually meet when I’m in that community with a group of 

local bankers, solicit their ideas of how we could provide better 

service and better products. We probably could formalize that a little bit more. Those are more informal gatherings and I think that 

input is important so that we can design a program that banks can 

implement, and that’s our key goal. 

Mrs. BIGGERT. So when you have been doing this, are you touching all areas of the country? 

Mr. HOCHBERG. I have been from Billings, Montana, to Chicago 

to New York to Boston to Syracuse, to Long Island. I have lost 

track of the 16 cities I have been to, and usually we’ll meet, depending on the community. The community bankers are large 

bankers. We’re also talking to credit unions, but a range of financial intermediaries to make sure we can meet particularly small 

business needs. 

Mrs. BIGGERT. How do you contact them in these different areas 

to make sure you’re getting the pulse of that? 

Mr. HOCHBERG. Most recently—to give an example—when I was 

in upstate New York in Congressman Maffei’s district, his office 

pulled together the local banks that they work with. So, frequently, 

we have done these consultations with a Member of Congress. I 

was in Cincinnati and Senator Brown and Congressman Driehaus 

brought in all their community Bankers who had an interest in 

this area. That has been our prime way. We also work with BAFT 

and other trade associations as well. 

Mrs. BIGGERT. Then various reports have been critical of Ex-Im’s 

application processing times. Is the Administration doing anything 

to help improve processing times for applications? 

Mr. HOCHBERG. I put it in my written testimony. I have three 

real priorities in the Bank: small business; renewable energy; and 

improving processing time. It is not where it needs to be. Since I 

joined the Bank a little over a year ago, we have reduced it by 

about a third in the number of our product areas. My goal is to cut 

it even more. Regrettably, that does take resources. It does take 

people to go through those finances. 

When you’re dealing with a small company, they often don’t have 

fully audited financials, so it takes more effort. And one of the impediments to really drastically improving our response time would 

be two-fold: one is resources of people; and I think we need to improve our IT systems. Many of these IT systems have not been 

touched for 12 to 15 years, and the world has changed dramatically 

in those 12 to 15 years. 

Mrs. BIGGERT. On page 6 of your written testimony, you mention 

that Ex-Im is expanding the scope of private-public partnerships. 

You mentioned that in addition to outreach, Ex-Im is looking for 

lenders to participate in the guarantee programs by originating, 

10 

and in some cases underwriting transactions. It seems like a great 

idea, and I think it will utilize the private sector resources and significantly expand the ability of Ex-Im to help more small businesses export and strengthen our economy and create jobs. Is this 

your plan, and what’s your timeframe for launching such an initiative? 

Mr. HOCHBERG. We currently at the Export-Import Bank work 

with approximately 50 banks. That’s clearly not enough banks, and 

so one of my goals has been to provide better outreach to small 

business owners to expand our network of banks. 

I spent almost 3 years at the Small Business Administration or 

as senior vice president of small business, formerly worked at the 

Small Business Administration. We are looking to leverage some of 

the banking relationships that they have with banks that are experienced working with small businesses to include them in ExportImport Bank programs; in fact, in speaking at their annual conference in the month of October to try and increase that. 

That’s a clear goal of ours. Again, my concern is as I bring in 

more business I want to make sure that I don’t want to over-promise and under-deliver in terms of service time for our customers. 

Mrs. BIGGERT. Thank you. My time is approaching. I yield back. 

Chairman MEEKS. Thank you. Chairman Moore of Kansas? 

Chairman MOORE OF KANSAS. Thank you. Chairman Hochberg, 

I appreciate the increased role the Ex-Im Bank has played in the 

recent financial crisis providing export credit to businesses that 

had a difficult time finding credit. But, more important, I am 

pleased the Bank has protected taxpayers and even paid back more 

than $4.5 billion to taxpayers since 1992. 

As we think about an expanded role for Ex-Im Bank to help meet 

the important goal of doubling exports in 5 years, what steps will 

Ex-Im take to ensure taxpayers are fully protected, and also, what 

additional steps can be taken to mitigate fraud with Ex-Im’s financing? 

Mr. HOCHBERG. Our loan write-offs are about 1.5 percent each 

year, which is probably better than most of the banks that this 

committee comes in contact with. 

We have a good working relationship with our acting Inspector 

General, Osvaldo Gratacos, and there are two kinds of things they 

worry about. One, we will make a bad loan now and then, that 

companies make a bet and we’re helping them. And sometimes 

things—I was in business—don’t turn out the way you think they 

will. That’s one thing. 

We really have no tolerance, whatsoever, for fraud. We are looking. There was some fraud years ago. I think that a number of the 

systems have been closed up and the Inspector General is a very 

strong ally in us trying to root out any opportunities for frauds that 

we make that last. As I said, it’s one thing to lose on a transaction 

that happens to go south in good faith versus one that’s fraudulent. 

Chairman MOORE OF KANSAS. Thank you, sir. An idea you mentioned, Chairman Hochberg, in our meeting last week to discuss today’s hearing was an idea to look for opportunities with Canada 

and Mexico, and see if we can cooperate better in looking for export 

opportunities where all three countries can compete better with 

other countries. 

11 

Would you discuss this idea, sir, and speak to how aggressively 

other countries are getting with promoting their own exports, and 

how do we make sure the United States doesn’t get outmaneuvered 

by other countries with these export opportunities? 

Mr. HOCHBERG. I think the National Export Initiative is designed 

to do exactly that. This is the first time that a President has called 

a national effort to rally around exporting, making it: one, easier 

for exporters to provide the advice; and two, providing the advocacy 

that our trade agreements are upheld, and that, frankly, there’s a 

level playing field for bidding. 

One of the challenges American companies face is that sometimes countries favor their local suppliers over an American supplier. The United States Trade Representative and others, we work 

hard to make sure there’s a level playing field in accordance with 

the WTO. 

I think that’s a major piece, and the important piece that we supply is the financial resources, so that our companies can compete 

against other countries that are also getting Export-Import Bank 

from their respective bank’s creditors. 

Chairman MOORE OF KANSAS. Okay. Thank you, sir. I don’t know 

if you have had a chance to review the next panel’s testimony, but 

does your office have good relations with both the Inspector General’s office and GAO, and are there any particular recommendations they make in their testimony that you care to respond to? For 

example, the IG recommends improving the Ex-Im Bank’s information technology platform. Do you have a response to that, sir? 

Mr. HOCHBERG. When I meet with the Inspector General in my 

office, every single month, we have a meeting to review any open 

items to make sure that we have an open dialogue. And I do that 

with myself and our Chief Operating Officer. I am delighted that 

he finds our IT systems deficient. It probably does not take rocket 

science to figure that out, but they’re strained. They’re older systems where they have not really been invested in and we’re operating at a much higher level, both of transactions and of dollars in 

more difficult parts of the world. 

Chairman MOORE OF KANSAS. I yield back. Thank you, Mr. 

Chairman. 

Chairman MEEKS. Let me just ask one last question, and if anyone else has one final question, feel free, before I turn it over to 

Mr. Moore and the second panel. 

I know you were with the SBA administrator for a while. I was 

wondering, with Ex-Im Bank, I’m finding that to the degree, if I 

look at exporters, I don’t see the diversity. Is there any specific outreach that you’re doing to work to try to help, say, women-owned 

and minority-owned businesses so that they’re more into exporting 

and getting involved. Is there anything in that regard? 

Mr. HOCHBERG. We have an office of minority- and women-owned 

exporters. We are working with them. We have staff who are dedicated to that. We have staff, for example, dedicated purely to veterans as an example. And one of the other areas we’re working on 

very aggressively is Sub-Saharan Africa. I’ll be making my first 

trip there in November, partly because they’re offered as a community of interest in that regard. 

12 

In 2009, we supported just over a half a billion dollars worth of 

exports from minority- and women-owned businesses. In 2010, we 

were up about 10 percent to about $560 million. I think we still 

should do better, and I would look forward, if members of the committee can help us do that outreach, because sometime it’s a question of getting that information to those women- and minorityowned businesses that these resources are there. 

Chairman MEEKS. Thank you. And I look forward to working 

with you on that very endeavor and continuing to focus on the 

President’s great export initiative so that we can create jobs here 

in America. We thank you for your testimony. 

Mr. HOCHBERG. Thank you. Thank you very much. 

Chairman MOORE OF KANSAS. [presiding] I am pleased to introduce our second panel of witnesses today: Mr. Osvaldo Luis 

Gratacos, acting Inspector General of the Ex-Im Bank; Mr. Loren 

Yager, Director, International Affairs and Trade at GAO; and Mr. 

John Hardy, president, Coalition for Employment Through Exports. 

Without objection, your written statements will be made a part of 

the record. 

Mr. Gratacos, you are recognized for 5 minutes, sir. 

STATEMENT OF OSVALDO LUIS GRATACOS, ACTING INSPECTOR GENERAL, EXPORT–IMPORT BANK OF THE UNITED 

STATES 

Mr. GRATACOS. Good afternoon, Chairman Moore of Kansas, and 

distinguished members of these honorable subcommittees. Thank 

you for the invitation and opportunity to testify before you about 

the activities of the Office of Inspector General and the programs 

and operations of the Export-Import Bank. 

Before I continue, I would like to thank the Almighty for this opportunity, my family, and the members of the Ex-Im Bank OIG for 

their dedicated work. Ex-Im Bank, as you know, is the official credit agency of the United States. It supports the financing of U.S. 

goods and services, international markets, turning export opportunities into active sales that help U.S. companies of all sizes to create and maintain jobs in the United States. 

Ex-Im Bank has programs to address short-, medium-, and longterm needs of exporters, assuming the credit and country risk that 

the private sector is unable or unwilling to accept. As such, Ex-Im 

Bank plays and will be playing an important role in President 

Obama’s National Export Initiative. 

As expressed by Chairman Hochberg, recently Ex-Im Bank announced record authorization levels, reaching $21 billion in 2009, 

exceeding small business requirements of 20 percent, and will be 

reporting Fiscal Year 2010 authorization level, surpassing 2009 

levels. 

Today, the opportunity to increase American export is an important element of our Nation’s economic recovery. Extending Ex-Im 

Bank financing to more American manufacturer service providers 

and exporters, including small businesses, enhances accessibility to 

achieve the National Export Initiatives goal. 

As presented in our written testimony and discussed with Chairman Hochberg, Ex-Im Bank has taken some steps and is in the 

process of implementing some strategies in its efforts to increase 

13 

small business participation under the National Export Initiative 

and addressing recommendations issued by GAO. Ex-Im Bank’s 

role, coupled with the growth levels mentioned, about a percent of 

valuable opportunity for the alleged partner with Ex-Im Bank in 

support of its mission while exercising our statutory independence. 

Some history on our office: Ex-Im Bank was created in 2002 but 

the Inspector General did not officially take office until August 

2007. Since routine current staffing levels in April 2009, the OIG 

has issued 15 audit and special reports containing over 50 recommendations and suggestions for improvement, improving Ex-Im 

Bank operations. Our investigative efforts have resulted in a number of law enforcement actions including 51 indictments and arrests relating to over $45 million in claims paid by the Bank. 

One conviction, over 80 management referrals for actions and over $26 million in program savings due to policy cancellations 

arising out of investigations. Moreover, the OIG is currently investigating 48 open matters, representing approximately $327 million 

of claims paid by the Ex-Im Bank, or around 13 percent of all 

Banks claimed to pay as to the end of 2009. All of this has been 

accomplished with a modest budget of 2.5 million and a staff of 10 

professionals. 

The OIG through its statutory mission is committed to monitor 

and provide oversight in support of Ex-Im Bank’s mission. Chairman Moore, Chairman Meeks, ranking members and members of 

the committee and subcommittees, thank you, once again, for the 

opportunity to testify before you today, and I will be pleased to respond to any questions you might have. Thank you. 

[The prepared statement of Mr. Gratacos can be found on page 

28 of the appendix.] 

Chairman MOORE OF KANSAS. Thank you, Mr. Gratacos, for your 

statement, and I want to recognize now Mr. Yager for 5 minutes, 

sir. 

STATEMENT OF LOREN YAGER, DIRECTOR, INTERNATIONAL 

AFFAIRS AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY 

OFFICE 

Mr. YAGER. Chairman Moore, Chairman Meeks, and Ranking 

Member Biggert, thank you for the opportunity to appear before 

this joint subcommittee hearing to provide our perspective on the 

role of the U.S. Export-Import Bank in the context of the President’s initiative to increase exports. 

I know the time of the committee is very valuable, and given that 

my written statement is part of the record, let me just talk about 

three main contributions that GAO has made to congressional oversight of the Export-Import Bank. 

First, GAO completed a report for the Congress in 2006, which 

included a careful examination of the measures and the systems 

that Ex-Im had in place to track their progress in financing small 

business. One of the very first steps in ensuring that all efforts are 

being made to provide assistance to small business is establishing 

confidence and accountability in the measures used to track 

progress. While we found a number of weaknesses and problems in 

that examination, I am pleased to report that Ex-Im has been very 

responsive in making improvements to those systems and that 

14 

Congress can better rely on those measures as a fair representation 

of the Bank’s efforts for small businesses. 

Second, GAO completed a report in 2008 in response to a mandate in Ex-Im’s 2006 reauthorization bill that had a number of important provisions related to small business, including minorityand women-owned businesses. I’m aware that much of the language in that reauthorization bill was drafted within the Financial 

Services Committee, so I am pleased to appear before the two key 

subcommittees to represent that work. 

Our 2008 GAO report is a careful cross-check between the elements in that reauthorization bill and the actions that Ex-Im had 

taken in response. Ex-Im had addressed a number of the elements 

from that reauthorization, but we observed that they were in the 

early stages of using performance measures to improve their small 

business programs and results. 

Finally, GAO just released a study on one of the other key agencies involved in the National Export Initiative, and that’s the Foreign and Commercial Service of the Department of Commerce. A 

GAO team has recently traveled to a small sample of key export 

markets to gain some insights on U.S. efforts to achieve the goals 

of the National Export Initiative, as Ex-Im is only one of a number 

of agencies that will need to contribute to the success of that initiative. 

While I cut short my travel to participate in this hearing, I would 

be happy to provide some insights from that travel, as I met with 

many of the same persons as Ex-Im officials who proceeded me in 

some of those same locations. 

Thank you, once again, for the opportunity to appear before the 

hearing, and I would be happy to answer any questions on the 

broad range of GAO work related to the Export-Import Bank or to 

exports more broadly. 

Thank you. 

[The prepared statement of Mr. Yager can be found on page 60 

of the appendix.] 

Chairman MOORE OF KANSAS. Thank you, Mr. Yager. 

And now, Mr. Hardy, you’re recognized for 5 minutes, sir. 

STATEMENT OF JOHN HARDY, PRESIDENT, THE COALITION 

FOR EMPLOYMENT THROUGH EXPORTS 

Mr. HARDY. Thank you very much. 

Chairman Moore, Chairman Meeks, and Ranking Member 

Biggert, I am president of the Coalition for Employment through 

Exports, a coalition of exporters and banks promoting the expansion of U.S. exports and jobs that are generated thereby. 

CEE appreciates the opportunity to discuss the role of the Ex-Im 

Bank in the Administration’s National Export Initiative. Let me 

start by saying that CEE and its members are strong supporters 

of the Bank and view it as playing a critical role in the government’s response to the financial crisis. 

As you know, the crisis created a severe liquidity shortfall as the 

private sector stopped lending across-the-board; but, Ex-Im stepped 

in aggressively to fill the gap. And as Chairman Hochberg has spoken, it dramatically expanded its transaction volume. It also exVerDate Nov 24 2008 17:34 Dec 17, 2010 Jkt 062687 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\62687.TXT TERRIE
15 

panded lending to small businesses, but the Bank did not stop 

there. 

The Bank has been engaged in streamlining its processes, creating new programs to respond to the particular needs of exporters 

caught in the liquidity squeeze, such as extending Ex-Im guarantees to sub-suppliers within a supply chain. In short, we believe 

that Chairman Hochberg and the entire staff at the Bank should 

be commended for their excellent work responding to the crisis. 

We also believe that for Ex-Im to continue to provide increased 

support to exporters, it will have to aggressively address some of 

the constraints we have outlined in our testimony, especially as the 

liquidity situation continues to improve. With regard to the National Export Initiative, CEE and its membership believe that ExIm Bank, if fully competitive, can be a centerpiece in the success 

of that initiative. 

Ex-Im can facilitate the growth of exports and jobs more readily 

than almost any other agency in the U.S. Government. In comparison to other ECAs, which are parties to the OECD arrangement 

and its rules regarding premium rates, financing terms, and local 

costs, Ex-Im is quite competitive. The Bank is also a leader in 

areas such as project finance and support for small businesses. 

However, at present, many of the other OECD ECAs and their governments operate with a flexibility that the Bank is unable to replicate. 

For the NEI to be truly effective, Ex-Im Bank, with support from 

the Administration and Congress, should work on addressing these 

policy issues. The first is foreign content. The policy of requiring 

85 percent domestic content is flawed in the context of today’s global supply chains, which major exporters need to maintain their 

competitiveness internationally. 

Among the ECAs, there has been a shift towards more flexible 

content rules reflecting the increased emphasis at the ECAs upon 

a national interest or benefits approach to financing. This has been 

a long-developing trend, but it has been accelerated by the economic crisis, and indeed represents the perspective of most OECD 

ECAs, but of the non-OECD ECAs as well, particularly China, 

Brazil and India. 

Compared to other ECAs, Ex-Im Bank’s content rules are far and 

away the most stringent. Austria has the next highest content 

rules at 50 percent. Japan and Germany support their companies 

with as little as 30 percent domestic content. Moving on, the 

MARAD cargo preference requirements and the Tied Aid war chest 

restrictions are additional issues that need to be addressed. In different ways, they adversely affect the exporter, but we are confident each can be resolved with stronger government commitment 

to make Ex-Im fully competitive. 

Service exports and small business exports represent great opportunities for the Bank. The export of services, especially hightech services, is one of the fastest growing sectors of the U.S. economy. While the Bank is mandated to provide financing for services, 

it is not doing all that it should. The reasons include the lack of 

a services policy for the companies to refer to, the lack of a clear 

idea what the export actually comprises and the current stringent 

content rules that are based upon the manufacture of goods. The 

16 

content rules do not consider U.S. value received, which comprises 

in part intellectual property, research and development, global supply chain management, and even corporate brand; nor does the 

content rule include the high value jobs reflected in those elements. 

We would add only one comment: that supporting small business 

exports consumes very substantial staff resources. Recognizing the 

importance of this effort to U.S. jobs, CEE fully supports an increase in administrative appropriations, so the Bank will have the 

resources to add much needed staff and technological resources to 

continue to reach small businesses around the country. And, with 

the Bank operating on a self-sustaining basis, the burden of an increase is an entirely different matter than for other agencies. 

CEE, in preparation for the Ex-Im reauthorization this coming 

year, is already in discussions with Chairman Hochberg, his staff, 

and the Administration on these issues, and we will be preparing 

a draft bill for the benefit of Congress. We commend the subcommittee’s oversight of the Executive Branch on these issues and 

look forward to working with the committee on the reauthorization 

bill. 

Thank you. I’m happy to answer any questions. 

[The prepared statement of Mr. Hardy can be found on page 41 

of the appendix.] 

Chairman MOORE OF KANSAS. My thanks to the witnesses for 

your testimony, and I now recognize myself for 5 minutes for questions. 

Mr. Gratacos, I know your office is relatively new, but you have 

announced a number of cases where you have identified and 

stopped fraudulent activity with Ex-Im funds. As we think of the 

goal to double exports in 5 years and the Ex-Im Bank’s playing a 

key role in the effort, do you have any recommendations for building a stronger fraud prevention mechanism with respect to Ex-Im’s 

activities? 

Mr. GRATACOS. Thank you for the question, Chairman Moore. 

There have been a number of fraudulent cases, the biggest portion 

on the Medium Term Program, which is the program that offers financing terms up to 5 years, sometimes 7 years in some instances. 

That was a program that we first got exposed to when we opened 

our office, given the losses. 

We did a big audit of that program. Some small businesses actually benefitted from that program, and we found that there were 

a number of fraudulent cases, and we heard that part of them is 

due to lack of resources. That’s one of the points that we can acknowledge other than the front-end and the back end oversight in 

terms of the asset management of those claims; but, we also know 

that there was a lack of implementation and of some due diligence 

efforts on the Bank’s side, and we have recommended a number of 

steps where we have highlighted some of the shortcomings in some 

of the transactions. We have conveyed those steps to the Bank in 

our efforts to promote sound, due diligent practices, and also a 

number of lessons learned. 

Chairman Hochberg alluded to a number of situations where 

some of those buyers did not have financial information available 

to them or audit their financial statements. So it makes it a little 

bit harder for the Ex-Im Bank staff to address some of the finanVerDate Nov 24 2008 17:34 Dec 17, 2010 Jkt 062687 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\62687.TXT TERRIE
17 

cials when they see it up front. But we still believe there’s some 

current improvement within the current frames of the short-term 

working capital programs and medium term programs. 

Chairman MOORE OF KANSAS. Thank you. It’s clear that global 

business is getting more, not less competitive, and other countries 

are working hard to promote export or opportunities for their domestic businesses. 

Mr. Yager, our two subcommittees are sending a letter to GAO 

today requesting a new report on these issues. I won’t read the entire letter, but we write that, ‘‘We are particularly interested in the 

range of goals pursued by export credit agencies of other developed 

nations and how they balance the needs to serve small and medium enterprises while still supporting other export goals. We are 

also interested in whether there are lessons that the United States 

might learn from those other nations in terms of providing assistance to the private sector.’’ 

Would you speak to this request? Generally, Mr. Yager, is this 

a good issue for GAO to investigate, and would lessons learned 

from this new report help improve the effort to achieve the goal of 

doubling exports in 5 years? 

Mr. YAGER. Chairman Moore, thanks for the letter. 

I did take a look at the letter, and I should comment that I did 

a testimony last year which addressed in a summary level the export promotion activities of other nations. I have been quite surprised at the fact that there were so many people who have contacted me after that relatively brief testimony where we did the 

summary work on the efforts of other nations. 

And frankly, that interest has come both from Capitol Hill as 

well as from the private sector and others, so it seems like an issue 

where there is a great deal of interest, certainly within the United 

States and even outside, so we look forward to looking into that 

issue. I believe we have the expertise to look into that, and we 

have relations with some of the other countries where we can work 

with those export credit agencies to learn more about what they do. 

Certainly, I hope that we get some insights that will be useful 

to the Congress in making decisions about how Ex-Im can use 

those results and make some changes to the way they use their resources. 

Chairman MOORE OF KANSAS. Thank you, sir. 

Mr. Hardy, you lay out a number of helpful observations in your 

testimony. Do you believe the United States can meet the President’s goal to double our exports in 5 years? And how do we ensure 

businesses—both large and small—have every opportunity to compete globally? What are the top two or three things the Ex-Im 

Bank should focus to support this goal? 

Mr. HARDY. Chairman Moore, thank you very much for your 

question. 

We do believe that the President’s initiative can be met, but in 

order to accomplish that task, we believe that—and this reverts 

back in part to the question that you asked Mr. Yager, and that 

is we need to understand much better what the competitive environment is internationally. It is very aggressive. 

As the chairman said, it’s brutally competitive and there will 

need to be, we believe, changes made to the conditions under which 

18 

Ex-Im operates that will allow it to be more flexible and to be able 

to match the offers made by other countries; and, as such, to become more competitive in a very difficult environment. 

If that’s the case, then I think there’s every possibility that doubling of exports in this period of time is possible. 

Chairman MOORE OF KANSAS. Thank you. 

The Chair next recognizes the ranking member, Mrs. Biggert, for 

5 minutes. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Just following up, Mr. Hardy. It seems like we have delayed 

these trade agreements and so many other countries have had so 

many more trade agreements in this hemisphere and throughout 

the various areas. Aren’t we really behind? How are we going to 

win back some of the sales that other countries have already had 

a much better agreement? 

Mr. HARDY. Thank you, Mrs. Biggert. 

I think you’re right that we are behind, but at the same time, 

as Chairman Hochberg said in the very beginning, there’s extraordinary demand for U.S. goods and services; once we do move forward and the Administration is able to address and resolve the 

issues that have held us up, we have the ability to move quickly 

and actually to be able to capture back those exports. 

The concern that I think exists, and it exists with a number of 

member exporters in CEE, is that for high value goods, it’s extraordinarily competitive. And the longer time goes on where we are not 

able to match offers by the export credit agencies of other countries, which particularly in the current economic climate are aggressively pursuing not only the specific transactions, but also trying to get an edge in terms of establishing footholds in other markets, U.S. exporters will lose opportunities. 

It does become increasingly difficult, so that I think that there 

is a concern there. But the United States is resilient and can be 

very responsive. The exporting community can be very responsive, 

but there is no question that time lost is certainly a delay, too. 

Mrs. BIGGERT. Isn’t it too where we have to pay so many tariffs 

for entry into some of these countries? So our goods are costing so 

much more, does that lessen our competitiveness? 

Mr. HARDY. Absolutely. I don’t think there’s any question about 

it, and, of course, that goes back to the issue of enforcing the laws 

that we have entered into; ensuring all parties to these agreements 

are complying with their obligations; and that is an increasingly 

difficult situation. 

Mrs. BIGGERT. Thank you. 

Mr. HARDY. Thank you. 

Mrs. BIGGERT. Mr. Gratacos, and I probably didn’t pronounce 

that right, I asked Chairman Hochberg about criticism of the ExIm’s application processing times. Could you comment on that? 

Mr. GRATACOS. That has been one of the biggest criticisms of the 

Bank from since I remember. The Bank did take some actions regarding addressing that issue. One of them was developing the ExIm on-line system. The Ex-Im Bank has helped lower the processing time, but still has some work to do, especially once it goes 

to the second and third phases of the transaction. It has become 

19 

more like a data collection type of system, and it doesn’t communicate with the other systems that the Bank has. 

But the Bank has actually taken some steps that they initiated 

as part of the National Export Initiative and because of our recommendations. One of them is they created cell groups to try to address some of those transactions, especially coming from certain 

markets where they can create a team of credit underwriting and 

approval people up front, and try to lower the processing time. And 

since January-February of this year, we have been able to use that 

as a test, and it has achieved some results. They also are planning 

on doing something similar for small businesses down the road. 

Mrs. BIGGERT. Thank you. 

And then, Mr. Yager, in your testimony, and I think I asked this 

question early on to Mr. Hochberg, too, but you in your testimony, 

an area in which Ex-Im could do better is communicating goals and 

strategies with the stakeholders. What’s the result of their weakness in this area? 

Mr. YAGER. One of the interesting examples that we looked at is 

a report that was issued quite recently on Ex-Im’s efforts to achieve 

environmental exports, and they have not reached that goal. As a 

matter of fact, the Ex-Im achievements there are really just a fraction of the 10 percent target. 

One of the things that we looked at is that they weren’t speaking 

with their stakeholders and communicating with the stakeholders 

on how important that target was, and so the stakeholders, who 

were doing a lot of the front-end work for Ex-Im Bank, were not 

even aware that Ex-Im had that priority target. Therefore, they 

weren’t going out and looking for business as aggressively in those 

particular areas as they obviously would have if Ex-Im would have 

communicated clearly. 

One of our priority areas is environmentally beneficial products, 

and so that’s just one example of how working with stakeholders 

is important. I think another example that we could give is not just 

for Ex-Im, but for other U.S. agencies as well, and that is we all 

know that resources are very limited, and they will be limited even 

further in future years. That way they have to work with their 

other stakeholders, whether it’s State export agencies, whether it’s 

Banks, whether it’s other private sector sources. Even if funding is 

increased, they will still rely on those other stakeholders to help 

them achieve their goals. 

Mrs. BIGGERT. Thank you. 

I yield back. 

Chairman MOORE OF KANSAS. Thank you. The Chair next recognizes Chairman Meeks for 5 minutes, sir. 

Chairman MEEKS. Thank you, Mr. Chairman. I guess I’ll start 

with Mr. Hardy. What I’m hearing from everyone and everyone we 

know about part of the challenge and the keys being competitive 

globally. And I know in Mr. Hochberg’s remarks, he spoke about 

export credit agencies in emerging markets and principally in 

China that they use Tied Aid and other market distorting measures, and use these to promote their exports, and they are not subject to some of the same fair market rules that the OECD countries 

have chosen to impose upon themselves to ensure fair competition 

globally. 

20 

I was wondering if you could give us examples of such distortions 

and share your thoughts on what American exporters needed to do 

so that we make sure in competing with exports in someplace like 

China who have distorted the market, what do you think we need 

to do and what should we be doing? 

Mr. HARDY. Thank you very much for the question. This is a very 

difficult issue, and it’s an issue about which certainly there’s an 

awful lot of press, indeed, we have anecdotal information about 

specific situations, particularly for American companies in Africa, 

in which U.S. companies have run up against this and have had 

particular difficulties in terms of contracts that they thought had 

already been awarded to them that had been subsequently reversed 

when the Chinese came in and offered soft financing. 

CEE also represents the business perspective to the OECD; and 

in the course of our involvement with the OECD, we have engaged 

the OECD on this issue. It’s a grave concern to the OECD, because 

obviously, as we commented in our testimony, there are a number 

of non-OECD ECAs that are not bound by the arrangement and 

the rules under which the OECD ECAs are operating. 

China is far and away the most aggressive of the non-OECD 

ECAs; at one level we have tried to work with the OECD to bring 

China into an improved relationship with the OECD which will reduce some of these steps, very aggressive steps, that the Chinese 

are taking. Within the national context, the United States has a 

Tied Aid war chest, and the war chest has existed for a number 

of years precisely for these sorts of situations where an export credit agency has broken the rules of the OECD arrangement. 

And under the rules of the arrangement, countries like the 

United States are allowed to match the offers in violation of OECD 

rules to basically establish a principle that we are not going to 

allow this aggressive and illegitimate behavior that’s outside the 

bounds of rules that had been internationally agreed upon, even 

though China is not part of the arrangement, but to match those 

terms in an effort to make the process more expensive for them. 

And it seems to us that there needs to be greater recourse to the 

Tied Aid war chest, in order to make the process more expensive, 

and to demonstrate that we are not going to walk away from those 

efforts, but rather we will match the Chinese and continue to support our exporters. 

Chairman MEEKS. And to me, that’s one of the key areas of 

which we need to move in. And I don’t know whether the Ex-Im 

Bank can be helpful in that regard, because I think part of the confusion that the American people have, and you may talk trade to 

some, and they said, oh, we’re against trade. They don’t understand 

trade. And when people start talking about trade deficits, and particularly exporting, it seems like the deficit we have is with China. 

China is exporting more than we. 

But, if we were able to talk about how we’re leveling that playing 

field to show how our businesses are competing and, in fact, that 

is creating the jobs here, I think it can turn the tide of the difficulty that we have sometimes here in the United States Congress 

to pass some of these trade agreements. And, so, I do believe that’s 

some of the focus that we need to have, because it begins to level 

21 

the playing field when most of our trade deficit is either with 

China or dealing with fossil fuels. 

And people don’t think of it that way. They think of trade as 

being jobs that are just going overseas, when in fact that’s not the 

case at all. Trade and outsourcing are two different things, and we 

have to reeducate the American public in that regard. And I think 

that working with you and your organization, we can move very 

definitely in that direction. 

Lastly, because I see that I’m out of time and I know that we 

have votes coming up, it is that same spirit of competitiveness, finance. Finance. How critical is trade finance among the challenges 

that you see in helping our American companies being able to compete on a global scale in a global market? And what do you see 

that’s possible that we can do to help that so that we can move forward too, and, again, to me open up the greater global opportunities that are out there. 

I’ll start with you, Mr. Gratacos, and then Mr. Yager and Mr. 

Hardy. And then I’m done. 

Mr. GRATACOS. Thanks for the question, Chairman Meeks. If I 

understand correctly, you’re talking about access to finance for 

American exports. 

Chairman MEEKS. Correct. 

Mr. GRATACOS. Obviously, it’s a little bit outside of the IG scope. 

Chairman MEEKS. I know. The prosecutor wants to do that. 

[laughter] 

Mr. GRATACOS. So there’s not much we can add in this regard. 

Chairman MEEKS. It’s really Mr. Hardy’s question. 

Mr. GRATACOS. Correct. But, obviously, access to finance, yes, is 

important to American exports. 

Chairman MEEKS. Mr. Yager? 

Mr. YAGER. Chairman Meeks, let me go in a slightly different direction, because I’m sure that Mr. Hardy will talk about the importance of finance, but let me make a point about some of the other 

partners, some of the other U.S. Government partners that are also 

essential in this effort, for example, the U.S. Foreign and Commercial Service. They provide the personnel in foreign locations that 

help U.S. firms learn about those export markets, and they sell 

services, such as the Gold Key service, where they provide information on the markets as well as connect U.S. exporters with potential buyers in those other countries abroad. 

And that particular service in many of these booming, emerging 

markets, is meeting the market test, because the Foreign and Commercial Service is required to charge full price for those services to 

large exporters, and they charge half the price or half the cost to 

small exporters. And in many cases, they’re booked up months 

ahead and find themselves unable to promote their services, because they’re already booked up. 

So I think one of the other things to keep in mind is that as important as export financing is, there is a package of government 

services and a number of different kinds of assistance that is needed by exporters, particularly small exporters, when they want to 

make that move from the U.S. market to a foreign market. 

And so a healthy Foreign and Commercial Service as well as the 

Small Business Administration, all those parts, are necessary for 

22 

many of these exporters, to make that move into the foreign markets and to be successful there. 

Chairman MEEKS. Mr. Hardy, do you want to say something? 

Mr. HARDY. I’ll be brief. The purpose underlying the OECD arrangement was effectively to take financing out of the competitive 

environment so that you would get essentially equivalent financing 

for the same transaction, whether you went to one ECA or an other 

ECA, as long as they were part of the OECD. But it has never 

worked that way. 

Gaining an edge in financing has always been absolutely critical 

in terms of competitiveness of exports. It’s never just about the 

quality of the product, even though we would love to have that. Because at the end of the day, American products are going to come 

out ahead and services are going to come out ahead, but it has 

never been that straightforward. 

Outside of the United States, there has always been concessional 

financing, mixed credits, a variety of different types of financing 

combined in order to create that edge. And with the economic climate that we’re in now, that edge is all the more important. 

And the question that you raised about China is certainly absolutely reflective of this: that they have made a decision at the highest levels to move in a certain direction, and they have put whatever necessary fundings to obtain that objective behind it, and 

that’s the nature of the dilemma. 

Chairman MOORE OF KANSAS. Thank you, sir. 

Mrs. Biggert, do you have a request? 

Mrs. BIGGERT. Yes, I do. At the end of my opening statement I 

did ask unanimous consent that testimony be included in today’s 

hearing record from a small business in my district, Apex Engineering Products, and also testimony from IFSA, the Bankers Association for Finance and Trade and International Financial Services 

Association. 

Chairman MOORE OF KANSAS. Without objection, it is so ordered. 

Mrs. BIGGERT. Thank you. I yield back. 

Chairman MOORE OF KANSAS. Again, the Chair wishes to thank 

all of our witnesses for your testimony here today. Today’s joint 

subcommittee hearing has given us an opportunity to learn what 

Ex-Im Bank is focused on and how it will play a key role in meeting the President’s National Export Initiative to double exports in 

5 years. This committee will continue examining these issues, especially with the Ex-Im Bank’s reauthorization up next year. 

The Chair notes that some members may have additional questions for our witnesses, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

The hearing is adjourned. My thanks to all. 

[Whereupon, at 5:23 p.m., the hearing was adjourned.] 

(23) 

A P P E N D I X 

September 29, 2010 

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